Trustco : Financial Reporting as an Investment Entity

30 March 2023

Disclaimer

This Document has been prepared by Trustco Group Holdings Ltd. It is protected by International Copyright laws and is for the recipient's use in connection with considering a potential business relationship with Trustco Group Holdings Ltd and/or its subsidiary or investment companies only. This document and any related materials are confidential and may not be distributed or reproduced (in whole or in part) in any form without Trustco's written permission.

By accepting or accessing this document or any related materials you agree to be bound by the limitations and conditions set out herein and in particular, it will be taken to have represented, warranted and undertaken that you have read and agreed to comply with the contents of this disclaimer without limitation, the obligation to keep the information contained in this document and any related materials confidential.

The information in this document does not purport to be comprehensive and has been provided by Trustco Group Holdings to you for information purposes only. All projections are subject to change and where necessary transactions are subject to regulatory, board and shareholder approval.

The information contained in this presentation (the Information) is confidential and is proprietary to Trustco Group Holdings Ltd and/or its subsidiary and investment companies and/or its affiliate companies (collectively "Trustco"). This presentation is made on the condition that you as the receiving party maintain and uphold the confidentiality and the proprietary nature of the information and irrevocably agree that you:

• • Will not copy the information or disclose the information to any person not present at this presentation;

• • Acknowledge that the information constitutes intellectual property of which Trustco is the proprietor;

• • Will not use the information in any way that is directly or indirectly detrimental to Trustco, in competition with Trustco, commercially or otherwise, or to obtain any commercial advantage over Trustco;

• • Will exercise reasonable standards of care in protecting the information, no less than you customarily use in preserving and safeguarding your own confidential information.

IFRS 10

Exception to consolidation

IFRS 10 is an international financial reporting standard that sets out the guidelines for the preparation and presentation of consolidated financial statements. Its primary purpose is to provide a comprehensive framework for identifying and reporting on a company's control of an subsidiary, and for determining the appropriate consolidation treatment of that subsidiary in the financial statements of the investor.

Under IFRS 10, investment entities are exempted from the requirement to consolidate their subsidiaries, and instead, are required to measure their investments in subsidiaries at fair value through profit or loss.

This consolidation exception applies only if an entity meets the definition of an investment entity and it measures substantially all its subsidiaries at fair value through profit or loss, or they are themselves subsidiaries of an investment entity.

"…an investment entity shall not consolidate its subsidiaries or apply IFRS 3 when it obtains control of another entity. Instead, an investment entity shall measure an investment in a subsidiary at fair value through profit or loss…"

- IFRS 10, paragraph 32

IFRS 10

Investment Entity

The rationale behind the consolidation exception is that investment entities primarily invest in companies for the purpose of generating returns from capital appreciation and investment income, rather than for control or strategic purposes. Consolidation may not be relevant for investment entities as their objective is to hold and manage investments rather than to manage the performance of the underlying businesses.

Trustco and the Trustco Investment Ecosystem:

• a) Received funds from multiple investors to invest

• b) Trustco's business purpose is sustainable, medium- to long-term wealth creation through capital appreciation and investment income for our stakeholders

• c) Measures and evaluates the performance of its investments on a fair value basis.

"A parent shall determine whether it is an investment entity. An investment entity is an entity that:

(a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;

(b)commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

(c) measures and evaluates the performance of substantially all of its investments on a fair value basis."

- IFRS 10, paragraph 27

IFRS 10 & 13

Fair Value

IFRS 10 requires investment entities to measure their investments at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date..

The market participant perspective is a key concept in fair value measurement as per IFRS 13. It involves determining the fair value of an asset or liability based on the assumptions that market participants would use when pricing the asset or liability, taking into account any differences between the assumptions of market participants and the entity's own assumptions.

Trustco's valuations were predominantly done via the income approach, with differing discount rates relative to the portfolio companies' activities, all applied from a market participant's perspective, unless a market price was available.

"Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (ie an exit price) regardless of whether that price is directly observable or estimated using another valuation technique."

- IFRS 13, paragraph 24